Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
($ thousands) Period 0 1 2 3 4 5 6 7 Net cash flow 14,000 1,624 3,087 6,463 10,674 10,125 5,897 3,409 Present value at
($ thousands) Period 0 1 2 3 4 5 6 7 Net cash flow 14,000 1,624 3,087 6,463 10,674 10,125 5,897 3,409 Present value at 22% 14,000 1,331 2,074 3,559 4,818 3,746 1,788 847 Net present value = 1,502 (sum of PVs) Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 22% nominal rate and 8% expected inflation. NPV should be unchanged at +1,502, or $1,502,000. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Net cash flows (real) Net present value $
($ thousands)
Period
0 1 2 3 4 5 6 7
Net cash flow 14,000 1,624 3,087 6,463 10,674 10,125 5,897 3,409
Present value at 22% 14,000 1,331 2,074 3,559 4,818 3,746 1,788 847
Net present value = 1,502 (sum of PVs)
Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 22% nominal rate and 8% expected inflation. NPV should be unchanged at +1,502, or $1,502,000. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number.)
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Net cash flows (real)
Net present value $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started